Now Back to Reality: SocialFi's Turbulent Journey

1. From Hype to Reality

For a time, SocialFi was hailed as the next big thing, blending the worlds of decentralized finance and social media to create platforms where users could 1) monetize content, 2) control their data, and 3) actively participate in governance.?

This concept, merging blockchain with the social experience, promised a paradigm shift similar to what we saw with groundbreaking platforms like WeChat and TikTok in the APAC region. Just as platforms like ZEPETO and Roblox have captivated younger generations with immersive digital worlds, SocialFi aimed to revolutionize how people interact, trade, and create value online.

Despite its potential, the initial excitement around SocialFi has fizzled due to declining user engagement, fading interest, and unsustainable project models. As a result, major projects that once promised to revolutionize social interaction have seen sharp drops in user activity and participation.?

Understanding why this decline has happened is crucial—not to pinpoint mistakes, but to identify opportunities that could lead to a resurgence. This report delves into the rise and fall of key SocialFi platforms and their business lifecycle, analyzing the trends and challenges companies must consider as they move forward to align with it.

2. Lessons from the Frontier SocialFi Projects

2.1. Dissolution: Relinquished Control

Friend.tech launched with a significant buzz, quickly attracting users through airdrops and its second version update (V2). Users were excited by the platform's unique model, which tokenized social media interactions. This created an instant market for users to trade social clout and engagement. Early adopters rushed in, generating massive user activity and token speculation.

However, things suddenly changed for the Friend.tech team after the initial sucess. Following the release of V2, the team relinquished control of the smart contract on September 8 and transferred control to a null Ethereum address. This decision effectively prevented any future updates or new features from being implemented.?

While the platform remained operational, the lack of new functionalities caused the platform to lose its novelty, and user engagement dwindled rapidly. This stagnation directly affected user loyalty, as the absence of continuous updates led many early adopters to abandon the platform.

With the platform became increasingly stagnant, the FRIEND token lost its utility and was reduced to just another memecoin in the SocialFi ecosystem. By September 2024, Friend.tech’s revenue had collapsed, dropping from over $2 million in fees generated on September 14, 2023, to a mere $71 in fees a year later. With no practical use case remaining, the FRIEND token's value plummeted. This marked the effective end of Friend.tech’s relevance in the market.

The fall of Friend.tech demonstrates the risks of early decentralization when platform sustainability hasn’t been secured. This is especially risky in emerging markets like SocialFi, where user interest can fade quickly. Businesses should balance decentralization and control to avoid stagnation. User retention requires continuous innovation and updates to maintain interest in the product even if it is out of a decentralization regime.

2.2. Stagnation: The Decline of SocialFi Platforms

Despite its initial promise, SocialFi has faced significant challenges in sustaining long-term growth. Much like the short-lived excitement seen with other trends in the blockchain space, many SocialFi platforms found themselves struggling after the early hype faded. Lens Protocol, which made waves during the 2024 boom, serves as a prime example.

Read the full report on the Tiger Research substack page